A Michigan court ordered Kalshi to keep contracts related to sports events unavailable to Michigan residents with a preliminary injunction against the prediction market platform, with a penalty of $500,000 per day for non-compliance.
Ingham County Circuit Court Judge Rosemarie E. Aquilina signed the order on September 1, replacing a temporary restraining order issued in June, and ordered it remain in effect until the date of the court’s final order in Michigan’s lawsuit against Kalshi.
Pursuant to the ruling, Kalshi is not permitted to offer, list, execute, or settle any sports contracts for persons located in the state of Michigan, including the following and other products functionally equivalent to betting on sports over the internet: moneyline contracts; parlay contracts; over-under contracts; in-game contracts; and proposition contracts.
Kalshi must also utilize a third-party geolocation service provider licensed by the Michigan Gaming Control Board, which meets the geofencing requirements set by the Michigan Gaming Control Board. Kalshi must also pay $500,000 for each day in which the court determines Kalshi has failed to comply with the provisions of this order.
In March, Michigan Attorney General Dana Nessel, in conjunction with the Michigan Gaming Control Board, filed a lawsuit against Kalshi on behalf of the state government, claiming that the latter had broken the Michigan Lawful Sports Betting Act by allowing Michigan residents to trade on sports-related contracts without approval from the state gaming authority.
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Michigan maintains that the contracts offered through the federally regulated derivatives exchange are a form of sports betting. Kalshi contended that event contracts on Kalshi’s designated contract market will fall under the Commodity Exchange Act and be regularly overseen by the Commodity Futures Trading Commission.
Kalshi removed the case to federal court, and the federal judge granted Michigan’s motion to remand to the Ingham County Circuit Court. Aquilina then issued the June temporary restraining order, which included $120,000/day penalties and geolocation restrictions across the state.
As before, the new injunction raised the maximum daily fine that would be imposed if the case was still pending. The new injunction further required Kalshi to serve the order, within three business days, to futures commission merchants that offer sports event contracts on the exchange to their customers.
The court further stated that Kalshi was not responsible for the intermediaries’ customers when the location information is under the control of the FCM, but not Kalshi.
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The Michigan lawsuit is part of an active jurisdictional dispute over prediction markets, with state regulators asserting that the contracts on sports events are subject to their respective state gambling laws and Kalshi asserting that contracts on sports events traded on the federally-registered exchange are preempted by federal commodities law.
For now, however, Kalshi must continue blocking its covered sports markets in Michigan and must implement the geolocation safeguards described above, although this preliminary injunction does not resolve the merits of Michigan’s lawsuit. Michigan’s lawsuit continues toward a final judgment.
